5 Ways to Pay Off Surprising Debt When You Don’t Have an Emergency Fund

Editor’s Note: This story originally appeared on Penny Hoarder.

One morning, you go to your car and it won’t start. Or, you have a medical emergency that requires major surgery. Maybe a pipe bursts in your master bathroom and does a lot of damage. But you don’t have an emergency fund, so how do you get emergency money?

Emergencies can strike at any time. An emergency fund can help, but 37% of respondents to the Penny Hoarder’s State of Savings survey don’t have one. That means that for two out of five US consumers, if something goes wrong, they need a way to get emergency cash. We have five options for you to consider.

Expensive emergencies are difficult – emotionally and financially. There are ways to get the money you need if you don’t have an emergency fund, but what if you have to pay that money back? Or, what if you’re more committed to starting that emergency fund now?

We have some ways you can make quick cash below to help with both.

1. Put it on a Credit Card

Good:

• Quick access to funds
• Pay back later
• No additional application is required

Disadvantages:

• Interest rates are high
• The unpaid balance can be consolidated
• Potential impact of credit

If you already have a credit card, it can be one of the easiest options in an emergency. But if you can’t pay the balance in full, you’ll be tied to payments for a while. In addition, credit cards often come with high interest rates, and those extra fees can add up over time.

Bobbi Rebell, CFP and personal finance expert at CardRates.com, recommends paying close attention to the interest you’ll pay. If you have affordable options available, it makes sense to consider them.

“If you find yourself adding credit card debt to an already bad financial situation, try to negotiate with the issuer for a lower interest rate if possible,” adds Rebell.

He also suggests applying for a credit card with a no-interest introductory period.

“Some of them can be as long as 18 months, which can give you more breathing room to deal with your financial challenges.”

2. Take out a Personal Loan

Good:

• Competitive interest rates
• Predictable payments
• Flexibility in how funds are used

Disadvantages:

• Strict approval processes
• Origination fees and prepayment penalties
• Potential impact of credit

Loans are easier to get than ever before. You don’t even need to go through a local bank or credit union to get the funds you need quickly. Online loan marketplaces like AmOne make it easy to quickly compare pre-qualified offers from lenders head-to-head.

That said, personal loans come with interest and fees, so it’s important to consider the costs before borrowing. Kathy Gilchrist, founder and chief financial officer at Cardinal Bookkeeping & Advisory, said loans can come with downsides. However, you have another money-saving solution.

“Check to see if there’s a local nonprofit in your area that has a program that can help in your situation,” advises Gilchrist. “I served on the board of a local non-profit organization that had a program to provide short-term loans to people with urgent needs when all other resources have been exhausted.”

3. Borrow From Your 401(k).

Good:

• The payment goes back to your account
• No credit check is required
• Low interest rates

Disadvantages:

• Not available to everyone
• Loans come with restrictions
• Potential tax consequences

You may be able to access emergency funds if you have a 401(k). However, before you go this route, it is important to understand what is involved. First, you will be limited to the lesser of these two options:

• 50% of your credited account balance or $10,000, whichever is greater OR
• $50,000

The best thing about borrowing from your 401(k) is that you get the money back. You will only need to pay the interest, and interest rates are generally lower with a 401(k) loan. However, you will need to pay a 10% penalty unless you qualify for a hardship withdrawal or are age 59.5 or older.

“Taking money out of your retirement fund means that while you’re avoiding paying interest to the credit card company, you’re also taking away your own wealth structure,” warns Rebell.

“The money you take out is no longer compounded and grows, and in many cases, you will have to pay income tax on the money taken out. It is also important to look at the details of your specific plan because some funds impose restrictions on contributions for a certain period of time, which can harm your ability to build that nest egg for a long time,” he said.

4. Get a Home Loan

Good:

• Low interest rates
• Fixed monthly payments
• Great prices available

Disadvantages:

• Long approval process
• The risk of losing your home
• Closing costs and fees

Do you have equity in your home? If so, it can be used as collateral for a loan. Home equity loans and home equity lines of credit (HELOCs) can be another low-interest benefit over credit card debt.

With a home equity loan, you borrow money and pay it back, with interest. HELOCs, on the other hand, extend the amount of the loan you can use as needed over a fixed period of time, known as the draw period. You can compare your options with online lending marketplaces like LendingTree.

But Kyle Enright, president of lending at Achieve, said home equity lending comes with some downsides. Basically, you’ll be adding another monthly payment to your debt. You will be at risk of foreclosure if you miss payments.

“While some HELOCs are fixed-rate, most are variable-rate, meaning the amount — and therefore the monthly payment — can change over the life of the loan,” warns Enright. “Finally, eligibility for HELOCs and home equity loans varies by borrower, but can be challenging.”

5. Borrow from Friends or Family

Good:

• Flexible terms
• Low or no interest
• No credit check is required

Disadvantages:

• A difficult relationship
• The subtlety of the law
• Tax implications for lenders

Borrowing from loved ones seems like a great idea. You won’t be subject to a credit check, and your lender may even make a small fee by charging you interest. But this type of financial activity can have a negative impact on the relationship, so it is important to consider the obstacles first.

“Depending on your relationship with your family, this may be the best option you can find,” said Adem Selita, CEO and founder of The Debt Relief Company.

“Family is more likely to help you with the merger and you won’t need any forms or credit checks. However, make sure you’re good about it. Get the terms down on paper, if possible. The last thing you want to do is lose family members over money.”

Although you may have a limited amount of emergency cash, it is important to set aside a portion of your budget to build an emergency fund.

At first, make sure you have enough to cover car repairs or small medical bills. Then, in the long run, strive to cover at least a few months worth of essential expenses in case you become unemployed. It takes time, but it will be more worth it if you earn interest on your money rather than paying interest on your loan.

Stephanie Faris is a professional financial writer with over ten years of experience. His work has been featured on various financial websites, including Money Under 30, GoBankingRates, Retirable, Sapling and Sifter.